Offshore Business: Types of business / companies in Singapore

Doing Business in Singapore 2007

1. Licensing and Registration of Business Organisations

Generally, there is no restriction on the types of businesses that may be set up in Singapore except for some which have to apply for special licences e.g. banks, finance-related companies and manufacturers of goods gazetted within the schedules of the Control of Manufacture Act such as air-conditioners, beer and stout, cigars, firecrackers and steel products.

Every business in Singapore must be registered with the Accounting and Corporate Regulatory Authority (ACRA). This requirement also applies to any firm, individual or corporation, which carries on business as a nominee, trustee or agent for any foreign corporation.

2. Types of Business Organisations

Sole Proprietorships and General Partnerships

All sole proprietorships and partnerships must be registered with ACRA under the Business Registration Act, Cap 32. ACRA must be notified of any changes in the particulars of the proprietor, manager or partners of business firms within the prescribed timeline. Sole proprietorships and general partnerships are not corporate bodies, i.e. sole proprietors and partners of partnerships have unlimited liability for the debts and obligations that arise from the businesses.

Limited Liability Partnerships

A limited liability partnership (LLP) must be registered with ACRA under the Limited Liability Partnerships Act 2005. An LLP is essentially a partnership with limited liability. It is a body corporate and has legal personality separate from that of its partners. The partners of an LLP have limited liability for the debts and obligations incurred by the LLP. An LLP has perpetual succession and any change in the partners of an LLP will not affect its existence, rights and liabilities. An LLP can sue and be sued in its own name. It can acquire, own, hold and develop property and incur debts.

Companies

A limited liability company is the most common form of business entity in Singapore. A limited company is incorporated under the Companies Act, Cap. 50 and registered with ACRA. A limited company may be limited by shares or by guarantee. A company may be registered as a private company if it does not have more than 50 shareholders and its Articles of Association restricts the right to transfer shares. Otherwise, the company must be registered as a public company. A company is a body corporate and has a separate legal personality from its shareholders. The company can sue and be sued in its own name. It can own property and incur debts. The liability of the shareholders, if any, is limited to any amount unpaid on their shares. When the shares are fully paid-up, the shareholders have no further liability to contribute towards the debts of the company.

Joint Ventures

A joint venture may take the form of equity investment in a limited liability company, limited liability partnership or general partnership. Joint ventures are governed by the laws of companies, limited liability partnerships or general partnerships, as appropriate.

Foreign Companies

A foreign company wishing to establish a place of business or carry on business in Singapore may set up a branch. A subsidiary is a new legal entity incorporated under the Companies Act, Cap. 50 whilst a branch is an extension of a company incorporated elsewhere (i.e. the head office). A foreign company or a branch is to be registered with ACRA under the Companies Act, Cap. 50. Whether an overseas corporation is deemed to be carrying on business through a branch in Singapore depends on the nature of the activities proposed. To determine whether the proposed activities will require the registration of a Singapore branch, it is advisable to obtain professional advice from lawyers.

Representative Offices

A foreign company may establish a representative office in Singapore to undertake promotional and liaison activities on behalf of the parent company. A representative office is not permitted to engage in business, conclude contracts, or open or negotiate any letters of credit. It is thus not liable for Singapore income taxes. Approval for the establishment of a representative office must be obtained from International Enterprise Singapore (IE Singapore).

3. Incorporating a Company

Procedures

The reservation and approval of a name for the company is the first step in the incorporation procedure. This is done by submitting the proposed company name and relevant information online at ACRA’s BizFile website together with payment of the requisite fee. Once the name is approved, the incorporation information can be e-filed with ACRA. The company can commence business once it receives an e-notification of incorporation from ACRA, usually, on the same working day of successful e-filing. A hard copy of the certificate of incorporation can be purchased from ACRA for a fee.

With effect from 15 May 2003, a Singapore company can be incorporated with a minimum of one director who must be a natural person of full age and capacity. If the company has only one director, that director must be ordinarily resident in Singapore, that is, he must either be a Singapore citizen, Singapore Permanent Resident or an Employment Pass Holder. If the Singapore company has more than one director, only one director needs to be ordinarily resident in Singapore. Likewise, a company needs to have only one shareholder who may be an individual or a corporate entity. There is no restriction on foreign equity participation in a Singapore company.

There must be at least one company secretary who shall be a natural person and has his principal or only place of residence in Singapore. The sole director cannot act as the company secretary. Every company must have a registered office in Singapore to which correspondence may be sent.

The pre-incorporation procedures for the formation of a public limited company are essentially similar to those of a private limited company. The additional documents to be filed with ACRA are a statement in lieu of prospectus and a statutory declaration of compliance by the director that the company has not issued a prospectus.

In addition to the e-notification of incorporation, a public company has to obtain a second certificate, that is, the certificate to show that the company is entitled to commence business by ACRA.

A public company is required to hold a statutory meeting within a period of not less than one month and not more than three months after the date which the company is entitled to commence business. A copy of the statutory report and the auditors' report, if any, must be lodged with ACRA within 7 days from the date of the statutory meeting.

4. Annual Requirements for Companies

Every company must appoint one or more auditors to report to its
members on the accounts of the company unless it is dormant or a small
exempt private company (EPC). A dormant company refers to a company
with no accounting transactions. An EPC is one in which there are not
more than 20 shareholders and none of them is a corporate entity. A
small EPC is an EPC whose annual revenue does not exceed the prescribed
threshold. The thresholds are as follows:

(i) Financial year commencing on or after 15 May 2003 with revenue of less than S$2.5 million or

(ii) Financial year commencing on or after 1 June 2004 with revenue of less than S$5 million

The statutory audit requirement is removed for dormant companies
and small EPCs for financial year commencing on or after 15 May 2003.
However, these companies are still required to prepare their financial
statements in accordance with the Financial Reporting Standards.

At each annual general meeting (AGM) of the company, the directors
of the company are required to present an audited or unaudited (for
dormant companies or small EPCs) set of financial statements that gives
a true and fair view of the results/affairs for the company in the
preceding financial year.

The first AGM of a company must be held within 18 months from
the date of its incorporation and thereafter subsequent AGMs must be
held once every calendar year and not more than 15 months after the
last AGM. The audited/unaudited accounts laid before the shareholders
at the AGM should be made up to a date not more than 6 months before
the date of the AGM.

A private company may dispense with the holding of AGMs. All
matters to be done at the AGM such as laying of accounts, appointment
of auditors, etc can be resolved or done via written resolutions.

Every company is required to file its annual return and/or
audited/unaudited accounts with ACRA within one month from the date of
holding its AGM.

5. Registration of a Foreign Company

Procedures

The first step in the registration of a foreign company in
Singapore is to seek ACRA’s approval of the name of the corporation.
Once the name is approved, the registration papers and information can
be e-filed with ACRA for the registration of the foreign company. The
following documents must be submitted for registration:

A certified copy of the corporation’s certificate of
incorporation in its place of incorporation or origin, or a document of
similar effect.

A certified copy of the corporation’s certificate of change of name or a document of similar effect (if applicable).

A
certified copy of its charter, statutes, or memorandum and articles of
association or other instrument constituting or defining its structure.

A list of its directors stating their names,
residential addresses, nationalities, passport numbers, occupations and
dates of appointment as directors.

A memorandum of appointment of agents together with an
affidavit. There must be at least two agents who must be natural
persons, of full age and capacity and resident in Singapore, that is,
they must either be Singapore citizens, Singapore Permanent Residents
or holders of valid Employment Passes.

Notice of the location of the corporation’s registered
office in Singapore to which all communication and notices may be
addressed.

The agent of a foreign company is answerable for the execution
of all acts and matters as required to be done by the foreign company
under the Companies Act, Cap. 50 and is personally liable for any
penalties imposed on the foreign company for any contravention.

6. Annual Requirements for Foreign Companies

A branch of a foreign company has to e-file its audited financial
statements comprising the balance sheet, income statement and cash flow
statement. In addition, the branch is also required to e-file the
audited financial statement of the corporation based on the reporting
requirements in its country of incorporation (i.e. the head office). If
the laws in that country do not require audited financial statements,
financial statements according to Singapore requirements can be used
instead.

The financial statements of the branch and the corporation are to
be e-filed with ACRA within 2 months of the date of the AGM of the
corporation. If the corporation is not required to hold an AGM in its
country of incorporation and to prepare its balance sheet, it shall
e-file with the Registrar a balance sheet (in such form and containing
such particulars and annexed thereto such documents) as if it were a
public company incorporated in Singapore within 7 months from the date
of its financial year end. The company may, however, apply to the
Registrar in writing for an order relieving the foreign company from
the requirements of the Companies Act, Cap. 50 relating to the form and
content of the accounts or report.

In addition to the annual filing requirements, the branch is
required to e-file any changes in the particulars of the corporation
with ACRA, that is, any change of directors and their particulars,
change of capital, amendments of its constitution or change of local
agent.

7. Registration of a Limited Liability Company

Procedures

To register an LLP, the following information must be submitted to ACRA electronically:

The proposed name of the LLP, its proposed principal activities and registered address

The
name and personal particulars of each partner and if the LLP partner is
a corporate entity, the name of the company, registration number, date
of registration, registered office, country of
incorporation/registration and personal particulars of the authorised
representative

The name and personal particulars of the resident manager

At least one resident manager has to be appointed and his role
is prescribed by the LLP Act. He is answerable for the execution of all
acts and matters as required to be done by the LLP relating to annual
declaration of solvency/insolvency, the publication of name and limited
liability and the registration of changes in the particulars of the
LLP. The manager is also personally liable for all penalties imposed on
the LLP for any contravention of those sections unless he satisfies the
court hearing the matter that he should not be liable. In addition, the
manager is responsible for submission of the Partnership Tax Return to
the Inland Revenue Authority of Singapore (IRAS).

8. Termination of a Business

Sole Proprietorships and General Partnerships

Sole proprietors and partners may apply to ACRA, on payment of a prescribed fee, to terminate the business.

Limited Liability Partnerships

A Limited Liability Partnership may be terminated in the same manner as companies below.

Companies

Companies may be terminated by court order, voluntary liquidation
or making an application to ACRA for strike off. The company itself,
creditor, contributory, judicial manager or the Minister may make an
application to the High Court for the winding up of the company.
Circumstances where a company may be wound up by the court include the
instance where the company is unable to pay its debts.

Shareholders intending to wind down the business in an orderly
manner may liquidate the company voluntarily by way of members’
voluntary liquidation (where the company is solvent) or creditors’
voluntary liquidation (where the company is insolvent). A person known
as the liquidator is appointed to handle the legal procedures of
liquidation. The company’s assets are normally turned into cash to
settle outstanding liabilities before returning any surplus to
shareholders.

In the case of strike off, the business is terminated without
liquidating the company. The company has to obtain tax clearance from
the Inland Revenue Authority of Singapore and meet other stringent
requirements of ACRA before the company may apply to ACRA for strike
off.

9. Dispute Resolution

There are several avenues to resolve civil disputes in Singapore including:

Mediation

Mediation is the case where a neutral party known as the mediator
helps to negotiate with parties to resolve their disputes amicably.
Mediation is ideal for parties who wish to maintain their business
relationship where success hinges on the parties’ desire to reach an
amicable settlement. The Singapore Mediation Centre provides such
mediation services.

Arbitration

Arbitration is the case where one or more impartial persons known
as arbitrators will make a final and binding decision based on the
submission of parties who are in dispute. This is a consensual process
and the trial and hearing are conducted in private. The Singapore
International Arbitration Centre provides international and domestic
commercial arbitration services.

Litigation

Litigation is the traditional dispute resolution method by going to
trial at a court of law. The Singapore Court is relatively efficient
and has introduced advanced information technology such as electronic
filing and videoconferencing to allow witnesses outside Singapore to
testify in court. Court judgment is only enforceable in Singapore and
countries where there is reciprocal enforcement of judgments.

Comments

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sending

malabikajay 6 years agofrom Pune

Good Hub...

We are possibly trying to explore Singapore Market and would like to start up a new office in Joint venture process and could you please help me on that and also what are the scope of Offshore delivery opportunites in Singapore. About us pls visit: www.srmtech.net or drop me an email at ajaysharma@srmtech.net